The urgent need for sustainable cooling solutions in developing countries

Developing countries face growing demand for sustainable cooling solutions, driven by rising temperatures, urbanisation, and the need for climate resilience. Cooling is essential for public health, food security, and economic development. The report estimates that by 2050, the annual market demand for cooling solutions will reach $600 billion. Current cooling gaps, especially among smallholder farmers and lower-income households, highlight the need for inclusive and affordable solutions. The report projects that accelerating sustainable cooling adoption could reduce electricity consumption costs by $1.8 trillion by 2050, providing substantial economic benefits.

Diverse sources and sectors imply diverse cooling financing needs

The cooling market is diverse, spanning residential, industrial, agricultural, and healthcare sectors. Cooling solutions also range from passive strategies, like improved building design, to active solutions, such as air conditioning and refrigeration. Each sector presents unique financing challenges. While some companies, like large air-conditioning manufacturers, may access traditional debt financing, smaller firms and passive solution providers often require grants, subsidies, or concessional finance. The cooling-as-a-service (CaaS) model provides an innovative solution by offering cooling without the need for upfront capital expenditure. Passive cooling measures could further reduce the need for power sector investments by approximately $1.8 trillion, highlighting the financial viability of low-cost strategies.

Challenges and response strategies for promoting sustainable cooling

Several challenges hinder the widespread adoption of sustainable cooling technologies, including high upfront costs, lack of financing options, and the absence of supportive infrastructure. The report estimates that closing cooling gaps for small and medium-sized enterprises (SMEs) will require $179 billion to $584 billion by 2050, with significant investment needed in countries like China. Expanding the adoption of passive cooling strategies and high-efficiency technologies could result in $6.4 trillion in avoided costs, particularly benefiting regions such as East and South Asia, where savings of $2.6 trillion and $1.2 trillion, respectively, are projected. Recommended strategies to address these challenges include expanding public-private partnerships, improving access to concessional finance, and adopting policies to support cold chain development, especially for smallholder farmers.

Financing solutions and innovations

A range of financial instruments is required to meet the diverse cooling needs in developing countries. Blended finance, which combines public, private, and donor funds, is critical to de-risk investments and attract private capital. Development finance institutions, such as the IFC, are playing a leading role in mobilising investments for sustainable cooling. Additionally, innovative models like on-bill financing, where consumers repay the cost of energy-efficient appliances through their utility bills, have shown promise in increasing access to sustainable cooling solutions in regions such as West Africa. In terms of regional impacts, Africa, the Middle East, and Latin America could see potential savings ranging from $400 billion to $500 billion by adopting sustainable cooling measures.

Conclusions and recommendations

The report concludes with a call to scale up investment in sustainable cooling, emphasising the need for:

• Systematically tracking cooling finance to assess market growth and impact.
• Strengthening energy performance standards and integrating sustainable cooling into ESG criteria for multilateral development banks.
• Expanding concessional finance and de-risking private investments to increase the availability of affordable, sustainable cooling technologies.
• Promoting public-private partnerships to support the development of cold chains for agriculture and healthcare.
• Improving data collection on cooling markets to inform better financial decision-making and attract investments.